OMB, DoD remain mum on sequestration's impact on specific programs

Jared Serbu, DoD reporter, Federal News Radio

For more than a year, the executive branch's position on sequestration when
replying to questions from Congress has been doggedly consistent: the
administration was not developing plans to implement the automatic budget cuts,
but the results would be devastating.

That message underwent a subtle shift Wednesday when the Office of Management and
Budget's acting director and the Defense Department's deputy secretary testified
before the House Armed Services Committee: sequestration still would be
devastating, but agencies now are developing fallback plans in case doomsday
comes, and it's up to the legislative branch to avert disaster. Under the Budget
Control Act, the government would have to reduce spending by $1.2 trillion over 10
years.

Jeff Zients, director, OMB

But if lawmakers attending Wednesday's hearing were expecting a detailed blow-by-
blow account of what would happen if agencies had to implement those auto-piloted
cuts, they were sorely disappointed.

Acting OMB director Jeff Zients told lawmakers it was impossible to deliver a list
of which programs would be affected and which would not until Congress passes
appropriations bills for fiscal 2013. Without those, budget analysts don't have a
"denominator" they can rely on to implement the budget cuts mandated by last
year's Budget Control Act.

Nonetheless, he told the committee that OMB would be ready to issue a
sequestration order on Jan. 2, 2013, and agencies would have plans in place to
implement that order if Congress doesn't come up with an alternative.

And for ill or good, the numerous recent 11th-hour budget impasses on Capitol Hill
have given OMB and agencies plenty of opportunity to become experts in developing
worst-case-scenario playbooks, he said.

"We've had government shutdown threats, we've had the debt ceiling situation. We
know how to do this," Zients said. "But there are five months between today and
Jan. 2. That's plenty of time for Congress to pass balanced deficit reduction, and
it's more than enough time for us to be ready for having to implement the
sequester. But that's not where the energy should be spent. Where the energy
should be spent is trying to avoid sequestration, which everybody agrees would be
bad policy."

Memo begins the planning stage

In advance of the hearing, the Obama
administration issued guidance to agencies, telling them to start combing
through each of their programs, projects and activities to determine which ones
are exempted from sequestration by other parts of federal law. Those that aren't
will face cuts of roughly 10 percent next fiscal year.

While Zients couldn't name individual programs, he did try to give lawmakers a
flavor of what they could expect in their districts.

On the domestic spending side of the discretionary federal budget, 16,000 teachers
would face job losses, 700,000 children and mothers would lose access to nutrition
assistance programs and 100,000 children would lose their places in Head Start
programs, he said.

"In addition, the FAA would face significant cuts in operations. Food safety and
workplace safety inspections would be cut back," Zients said. "FBI agents, Border
Patrol agents and transportation safety staff would decline. And the NIH would
have to halt or curtail vital scientific research, such as research into cancer
and childhood diseases."

On the defense side, the Budget Control Act — the law which created
sequestration — leaves DoD with little flexibility about where to make its
$55 billion share of cuts in 2013, said Ashton Carter, the deputy secretary of
defense.

"I can describe many of sequestration's impacts on DoD, but it's not possible to
mitigate those consequences," he said. "The whole intent of sequester was to use
the threat of cuts, implemented inflexibly and mindlessly, to force Congress to
come up with a compromise deficit reduction plan. It was never designed to
actually be implemented."

Protecting the warfighter from cuts

Nonetheless, under that scenario, each of DoD's 2,500-or-so programs would take an
equally proportional share of the spending reductions, seriously disrupting
defense activities and making the programs the department already has in place
much less efficient, Carter said.

Ashton Carter, deputy secretary, DoD

"Some managers would be forced to buy fewer weapons, fewer articles," he said.
"Reductions in buy sizes will cause unit costs to rise, which will in turn result
in further cuts in buy sizes. In cases where we can't feasibly reduce the quantity
of items bought, we would also have to delay projects, which is also economically
inefficient. And many military construction projects would be rendered
unexecutable. We'd be forced to delay fixing schools, defer construction of new
medical facilities, delay cleanup and so-forth."

There are some important exceptions to the across the board cuts though. For
example, the law gives the President the authority to exempt military pay accounts
from the cuts, an option President Barack Obama decided to exercise this week. The
tradeoff, however, is that the rest of DoD's accounts would have to absorb extra
cuts to make up for that exemption.

Similarly, while the cuts technically apply to the overseas contingency operations
budget which pays for the war in Afghanistan, Carter said DoD would strive to
protect all warfighting operations.

Again though, that protection would come with a tradeoff, he said.

DoD's base budget and the contingency budget share many of the maintenance and
operations accounts, so it's possible to shift the spending reductions to the non-
war side of the Pentagon's budget ledger. But Carter said military forces would
suffer additional harm in the form of reduced readiness for military units who are
about to deploy, especially in the Army and Marine Corps.

"We'd seek to minimize the effects, but we probably couldn't do so fully. Later-
deploying units would probably receive less training," he said. "We'd also have to
reduce funding for civilian personnel. We would probably have to release temporary
employees, impose a partial hiring freeze and impose unpaid furloughs on our
civilians. You can imagine the effect on the output, not to mention the morale, of
these defense employees."

Personnel services like commissaries and even health care for retirees and
military families also would suffer, Carter said.

Despite reports that DoD's program managers already have made
adjustments to contracting decisions as a preemptive move to prepare for
sequestration, Carter said the phenomenon is not showing up in the regularly-
updated acquisition data he sees, though he acknowledged he has heard anecdotal
reports that it was happening.

Business-as-usual

Zients said OMB is directing the entire federal workforce to treat its spending
activity as though it's business-as-usual. Even though the sequestration cuts are
the law of the land at the moment, managers should assume sequestration won't
happen when they're making day-to-day decisions.

"Agencies are instructed to continue their normal business operations," he said.
"They need to continue to spend at the appropriate level so that they don't
violate the anti-deficiency act, but at the same time not to slow down spending."

Carter said the OMB admonition is important, and that if it's not followed, DoD,
other agencies and the companies they contract with would end up suffering from
"self-imposed" effects of sequestration even if Congress ultimately agrees to undo
the automatic cuts.

"We don't want to unnecessarily alarm employees by announcing adverse personnel
actions or suggesting that those actions are likely," he said. "And for efficiency
reasons, we don't want to hold back on obligating funds, either for weapons
projects or operating programs that would have been obligated in the absence of a
possible sequestration. We also don't want to hold back on training, which would
harm readiness when we face a complex array of national security challenges."

Lawmakers and Zients took up at least half of the hearing with questions, answers
and diatribes that were highly partisan, unusually so for an Armed Services
Committee meeting, with Democrats and Republicans arguing over whose bright idea
sequestration was in the first place and which party was responsible for the fact
that Congress hasn't undone it yet.

While there are technically five months on the calendar for legislators to reach
an agreement, translating that period into an election season Congressional
schedule leaves precious little time to reach a deal. Lawmakers will be absent
from Washington for most of August and September.

Armed Services Committee chairman Buck McKeon (R-Calif.) is worried.

"We have two legislative weeks left before we leave for the election and go home
to tell people what a great job we're doing," McKeon said. "Then, we're going to
come back into a lame duck environment with people who have lost their elections
and working from desks down in the basement. Then we have to solve something
that's very, very important that we haven't been able to solve for a year and a
half. I'm frustrated with that. We have a responsibility to fix this. I just don't
know how we're going to go about that."